Investors target Canada’s top 40 carbon emitters

Investors team up to demand ambitious climate action from the country’s biggest GHG polluters

Forty of Canada’s highest carbon-emitting firms have just been added to the list of companies being targeted by large institutional investors to develop more ambitious climate action plans.

The new Climate Engagement Canada (CEC) initiative was launched last week by a group of more than two dozen of Canada’s largest asset managers, pension plans, insurers and banks. All agreed to collaborate on a three-year engagement program with the 40 companies to promote 1.5°C action plans with meaningful short-, medium- and long-term targets and to realign their capital expenditures and lobbying activities to support those goals.

Two years ago, the federal government’s Expert Panel on Sustainable Finance came out with a set of far-reaching recommendations to help shift Canada’s financial sector into gear on climate change. Among them was a push to establish a broad-based investor climate advocacy program to promote action by Canada’s largest greenhouse gas emitters on the Toronto Stock Exchange.

Globally, the $55-trillion investor coalition Climate Action 100+ was engaging 167 of the world’s largest publicly traded emitters to act on climate change, but only six corporations on the TSX made that list. The remaining out-of-scope Canadian companies, representing a collective 90% of the index market capitalization, are significantly owned by domestic investors -- making Canadian-investor-led action critical.

“We saw the potential to adapt a successful international model to the Canadian landscape and expand our reach,” says Barbara Zvan, former member of the expert panel and now CEO of the newly formed University Pension Plan, which is participating in the initiative. “Not only in terms of the number of Canadian companies engaged but also the degree of financial sector mobilization behind ambitious climate actions and a determined transition.”

After more than a year of development and discussion, the expert panel’s recommendation is now a reality.

By coordinating efforts between not only share owners but also lenders and insurers – all major sources of capital for Canadian firms – the CEC initiative hopes to set shared expectations for corporations, who often hear inconsistent messaging from capital markets. Working together with other supportive institutions – stock exchanges, consultants, accounting firms and industry bodies – the initiative intends to promote clear and consistent expectations, and pathways to achieve them, across Canadian markets.  

We will be shining a light on which companies are doing this and working with Climate Engagement Canada to help raise the bar.
-Toby Heaps, CEO of Corporate Knights

“At its core, the program will feature heavy lifting by dedicated investor teams that work regularly with companies to promote our common expectations and benchmarks and then help those businesses to meet them,” says Kevin Thomas, CEO of the Shareholder Association for Research and Education (SHARE), a Canadian non-profit investor advocacy organization that will coordinate action and research for the initiative. “Engagement will be persistent, results will be measured, and we’ll work to achieve real-world outcomes that are meaningful for the climate and support just transitions for affected workers and communities. That’s what matters.”

Investor teams will be assigned to each focus company and provided with a benchmark of the company’s progress to date and gaps to address in their performance. Progress will be measured against a framework that evaluates year-on-year changes and identifies next steps for each company and the teams assigned to them.

In addition to the coordination of CEC engagements by SHARE, the Responsible Investment Association (RIA), a trade group promoting responsible investment in Canada’s retail and institutional markets, will act as the administrative and communications arm of the initiative.

“Investor interest in climate action is not new, but it is growing exponentially,” says Dustyn Lanz, RIA’s CEO. “What CEC brings to the table is a way for us to elevate our individual efforts into a common campaign. We can do more together than we can apart.”

Collectively, SHARE, RIA, the UN Principles for Responsible Investment and Ceres are the CEC’s founding partners. The initiative has invited broad participation from the financial sector, and, while Canadians will lead, it will encourage support from global investors that share its ambitions.

Corporate Knights will track the initiative’s progress in future issues, based on the CEC’s framework and expectations, to help distinguish the Canadian firms that are “walking the talk” on net-zero commitments from those who are not.

“Canadian companies have all the ingredients to win in a low-carbon future,  but this promise will only be realized with a step-change investment in climate solutions,” says Toby Heaps, CEO of Corporate Knights. “We will be shining a light on which companies are doing this and working with Climate Engagement Canada to help raise the bar.”

Jennifer Story is associate director of climate advocacy at SHARE.

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